That’s gonna leave a mark.
A day after signing a new multiyear deal with Comcast’s NBCUniversal to keep its flagship shows “Raw” and “SmackDown” on USA Network and Syfy, respectively, WWE’s stock took a nose dive off the top rope.
Shares in the company were trading at around $11.51 mid-afternoon on Friday, losing $8.42 from its close on Thursday, or a whopping 42%. They were down to $10.59 earlier in the day.
The stock instantly took a tumble on Thursday in after-hours trading after WWE released a statement revealing that the licensing fee it would get from the new NBCU deal wouldn’t double its previous pact, which had been a target for the company during its negotiations.
“Over the past six months, the company has negotiated television distribution agreements in the U.S., U.K. and Thailand, and is in the midst of discussions regarding the distribution of WWE content in India,” the company said in a statement on Thursday after the close of the bell. “The company estimates that it will increase the average annual value of these key television agreements to approximately $200 million, representing an increase of more than $90 million, that is nearly three times the increase achieved in the previous round of negotiations.
Analysts are estimating that WWE was only able to increase the fee by 50%, according to research firm Benchmark.
WWE also said it could lose between $45 million to $52 million this year as it tries to build out its all-digital WWE Network and sign up new subscribers. It’s aiming for 1 million by the end of 2014, but needs 1.3 million to 1.4 million subscribers (who pay $9.99 a month) to make up for declines in its pay-per-view business. All of its PPVs, including “WrestleMania,” are now shown on the streaming service. While they are also available on most PPV providers at around $50 per event, the WWE Network reduces the amount of revenue each individual event generates for the company going forward.
“The company’s valuation could take a heavy beating this morning, as the new domestic TV deal with NBCU likely disappointed investors over limited visibility, believability on the ultimate success of the Network,” Benchmark analyst Mike Hickey said. “The initial subscriber number from the Network disappointed investors, and we have received limited visibility to where subscribers are currently tracking or where churn will ultimately settle; an uncomfortable silence that will likely extend until early August. We remain optimistic for the global success of the WWE Network, but consider the OIBDA growth shift to the Network as an unfavorable risk rebalance over the near term.”